SK Telecom's Q3 2025 Earnings Call: Contradictions Emerge on Dividend Policy, AI Infrastructure, and Customer Recovery

Date of Call: October 29, 2025

Financials Results

• Revenue: KRW 3,978.1 billion, down 12.2% YOY

Guidance:

• Q4: mobile revenue decline expected to continue but be significantly smaller than Q3 due to ongoing customer offers
• Q4 operating profit visibility is cautious because of typical year-end concentrated spending
• FY2026 guidance not finalized; company aims to recover mobile revenue and return dividends to pre-incident levels once operations normalize
• AI business (AI DC) to contribute to turnaround; Ulsan DC revenue ramps with profit expected from 2027
• A. B2C subscription under review targeting H1 2026
• Data center expansion target: 300MW / KRW 1 trillion revenue by 2030

Business Commentary:

* Financial Impact of Cybersecurity Incident: - SK Telecom's consolidated revenue posted KRW 3,978.1 billion, a 12.2% decline year-on-year. - The significant revenue decline was due to the cybersecurity incident leading to a 50% tariff discount for customers and a loss of many customers.

• AI Business Expansion:
• The AI business achieved a 35.7% year-on-year increase in revenue, with AI DC revenue reaching KRW 149.8 billion, up 53.8% year-on-year.

• Expansion was driven by acquisitions like the Pangyo data center and partnerships such as the GPU leasing support program.

• Customer Base and Mobile Service Growth:

• The number of 5G subscribers increased by approximately 240,000 Q-on-Q to 17.26 million.

• This growth was due to the launch of the Air digital communication service, targeting younger customers, and the recovery from the cybersecurity incident.

• Dividend Suspension and Future Outlook:

• The company decided not to declare a dividend for the third quarter due to the financial impact of the cybersecurity incident.
• SK Telecom aims to normalize operations from 2026 and restore dividends to pre-incident levels as financial performance improves.

Sentiment Analysis:

Overall Tone: Negative

• Management described an "unprecedented deterioration": revenue KRW 3,978.1bn (down 12.2% YoY), operating income fell 90.9% YoY to KRW 48.4bn, net income turned negative after a KRW 134.8bn PIPC fine, and the Board declined a Q3 dividend.

Q&A:

• Question from Jae-min Ahn (NH Investment & Securities Co., Ltd., Research Division): Can you discuss the Q3 dividend decision, visibility on a Q4 dividend and whether 2026 dividends will return to 2024 levels? Also provide 4Q performance outlook given ongoing 50% tariff discounts and customer offers.
  Response: No Q3 dividend; Q4 dividend undecided—Board will review after full-year results and cash flow; company aims to restore dividends to pre-incident levels once operations normalize in 2026; Q4 mobile revenue decline expected but materially smaller than Q3; operating profit visibility cautious due to year-end spending.

• Question from Heejin Lim (Citigroup Inc., Research Division): How many lost customers were regained this quarter and what are plans to win them back/marketing plans? Also, how will the new Air service affect top line and ARPU?
  Response: Churn was contained in August–September with net additions roughly neutral; focus is on qualitative recovery via granular customer analytics and segment-optimized products; Air targets unlocked-device users, expected to broaden subscribers with minimal impact on ARPU (priced similar to chief direct plan).

• Question from Sohyun Park (UBS Investment Bank, Research Division): Progress and timing for the Ulsan AI data center and any additional DC plans? Also, having surpassed 10m users for A., do you plan to charge for the service?
  Response: Ulsan AI DC construction began Sept 1; revenue will ramp and profitability expected from 2027; additional Seoul AI DC is in design aiming to help reach 300MW and KRW1tr revenue by 2030; A. exceeded 10.56m users, B2C paid models under review for H1 2026, and B2B monetization (agentic workflow) to start contributing from Q4.

• Question from Hong-sik Kim (Hana Securities): Why was the Q3 dividend waived and how does the company apply the 50% of adjusted consolidated net income payout policy—i.e., are one-offs treated as adjustments for dividends?
  Response: Q3 dividend waived due to the cybersecurity incident and its cash/financial impact; shareholder return policy targets 50% of adjusted consolidated net income as a symbolic lower bound; PIPC fine is treated as nonrecurring, while customer appreciation packages and SIM replacement costs are treated as recurring and not adjusted out; Board will assess future dividends based on full-year performance and cash flow.

Contradiction Point 1

Dividend Payout and Shareholder Returns

It involves changes in the company's stance on dividend payouts and shareholder returns, which are crucial expectations for investors.

What is the focus for the Q4 dividend and will 2026 dividends return to 2024 levels? What is the outlook for Q4 performance amid ongoing discounts and free offerings? - Jae-min Ahn (NH Investment & Securities)

2025Q3: The decision not to declare a dividend for Q3 reflects the financial impact from the cybersecurity incident. The company is committed to restoring stability and resuming dividend payments in the future. - Yang-Seob Kim(CFO)

What are SK Telecom's key focus areas for its AI business? Can you provide guidance on AI-related revenue outlook? Why was the DPS maintained at the same level, and what are the plans for shareholder returns in 2025, including share buybacks? - Kim Hoi Jae (Daishin Securities)

2024Q4: Shareholder return remains the highest in the industry, with a focus on stable cash dividend. Share buybacks could be considered if the stock is undervalued. - Yang-Seob Kim(CFO)

Contradiction Point 2

AI Infrastructure and Data Center Plans

It involves the company's plans and timeline for AI infrastructure and data center development, which are crucial for business growth and strategic positioning.

What is the progress and timeline for the Ulsan AI DC project? Are there plans to add more data centers? What are the plans to charge for A. service? - Sohyun Park (UBS Investment Bank)

2025Q3: The Ulsan AI data center construction began on September 1 and is progressing according to plan. Revenue will ramp up in proportion to utilization, with profits expected from 2027. - Unknown Executive

How does the adoption of affordable AI models like DeepSeek affect the AI infrastructure business? What business models are currently being pursued in the AIX business? - Kim Joonsop (KB Securities)

2024Q4: AI data centers require high tech capabilities for efficient operation. SK Group affiliates and partners contribute capabilities. AI data centers to become hubs in Asia. - Lee Hyunwoo

Contradiction Point 3

Customer Recovery and Market Stabilization

It involves differing statements on the company's approach to recovering customers and stabilizing the market following the cybersecurity incident, impacting consumer trust and market perception.

How many customers did you lose in the previous quarter, and what are your plans to win them back? What impact is Air having on revenue and ARPU? - Heejin Lim(Citigroup Inc.)

2025Q3: The company's focus is on qualitative customer recovery, not just numerical... Through granular customer analytics, the company will provide customized products and services to enhance customer satisfaction and competitiveness. - Unknown Executive

Has the cybersecurity incident affected customer churn to other mobile operators? - Joonsop Kim(KB Securities)

2025Q1: There was an increase in customers switching to other networks due to the cybersecurity incident. SK Telecom aims to regain customer trust and stabilize the market. - Yang-Seob Kim(CFO)

Contradiction Point 4

AIDC Business and Revenue Expectations

It involves inconsistencies in the company's outlook for its AIDC business and expected revenue streams, which could impact strategic investments and market positioning.

What is the progress and timeline to completion for the Ulsan AI DC project? - Sohyun Park(UBS Investment Bank)

2025Q3: Revenue will ramp up in proportion to utilization, with profits expected from 2027. The company is also pursuing an additional AI data center in Seoul. - Ji Hoon Kim

Can you provide details on future AIDC operations and expansion plans? - Soojin Kim(Mirae Asset Securities)

2025Q1: AIDC business aims for expansion with hyperscale data centers worldwide by 2027. Plans include modular AI data centers and dedicated AI data centers. - Hyunwoo Lee

Contradiction Point 5

Dividend Policy and Payout

It involves changes in financial policy regarding dividend payouts, which is a crucial indicator for investors regarding the company's financial health and commitment to shareholder returns.

What is the focus of the fourth-quarter dividend, and will the 2026 dividend return to 2024 levels? - Jae-min Ahn(NH Investment & Securities)

2025Q3: The decision not to declare a dividend for Q3 reflects the financial impact from the cybersecurity incident. The company is committed to restoring stability and resuming dividend payments in the future. - Yang-Seob Kim(CFO)

Is there any potential change to the shareholder return policy due to the incident? - Seung Woong Lee(Yuanta Securities)

2025Q1: Shareholder return policy remains unchanged, and stability in dividends is maintained...The company's dividend remains on the same schedule, and it is the same as what we've maintained in the past. - Yang-Seob Kim(CFO)